JGB futures gain as Nikkei advance flags

* JGB futures pare early losses as Nikkei's rise loses steam

* Japan sovereign CDS spread tightens on Greece news

* Yield curve steeper as superlongs lag after 30-yr sale

By Shinichi Saoshiro

TOKYO, Feb 10 (Reuters) - Japanese government bond futures gained on Wednesday, reversing an earlier drop as a rise in the Nikkei average .N225 flagged, denting the appeal of assets considered more risky.

The benchmark 10-year JGB also bounced back from an early loss and gained as investors such as pension funds bought on dips, market players said, while the yield curve steepened as superlongs lagged following a 30-year sale on Tuesday.

"JGBs drew incentives from the stock market, although it remains to be seen whether this will turn into a long-term trend," said Takafumi Yamawaki, a senior rates strategist at BNP Paribas Securities.

The Nikkei rose 0.3 percent, keeping the bulk of earlier gains but remaining within reach of a two-month closing low hit on Tuesday. [.T]

"Whether stocks bounce back from their latest adjustment phase will be key for JGBs. There are growing expectations of China engaging in extensive monetary tightening and that would make it difficult for stocks to rise, which in turn would support bonds," said Genji Tsukatani, head of fixed-income investment management at asset manager Schroders.

March 10-year JGB futures gained 0.10 point to 139.43 2JGBv1 after hitting 139.16 in an early reaction to weaker U.S. Treasuries and better-than-expected Japan December machinery orders figures.

Some investors including commodity trading advisers were seen to have bought JGB futures and sold stock futures, market players said.

The benchmark 10-year yield dipped 0.5 basis point to 1.330 percent JP10YTN=JBTC after rising to 1.350 percent.

Superlong JGBs lagged the 10-years following Tuesday's 600 billion yen ($6.7 billion) 30-year auction.

The sale drew the strongest demand since an auction of the maturity in June. TENDER15

The solid outcome, on the other hand, did not lead to a significant flattening of the yield curve as the market still has to face 30-year tenders in March and April, said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Securities.

The 20-year yield rose 1 basis point to 2.150 percent JP20YTN=JBTC and the 30-year yield climbed 1.5 basis points to 2.325 percent JP30YTN=JBTC.

The 10-year/20-year spread widened to 82 basis points from 80.5 basis points on Tuesday.

Japan's five-year sovereign credit default swap (CDS) spread traded at 82 basis points on Wednesday from 87 bps on Tuesday.

Traders said the spread, which rose to a 10-month high around 90 basis points last week, tightened as sovereign risk concerns eased slightly after a senior German coalition source said European governments have agreed in principle to help heavily indebted Greece. [ID:nSGE61801C]

Japan's core machinery orders rose more than expected in December from the previous month, easing concern that capital spending may continue to slump and shackle the economy's fragile recovery. [ID:nTOE618021]

U.S. Treasuries fell on Tuesday following a soft three-year note auction. [US/] ($1=89.67 Yen) (Additional reporting by Rika Otsuka; Editing by Michael Watson)